JOHANNESBURG - Sasol now expects the Lake Charles Chemical Project (LCCP) to swing to a loss of up to $100million (R1.9billion) in 2020 due to the significant weakness of chemical prices despite the plant ramp-up as it said yesterday that executives would make salary sacrifices due to the Covid-19 pandemic.
The petrochemicals giant revised the earnings before interest, taxes, depreciation and amortisation (Ebidta) contribution from the LCCP to a loss of between $50m to $100m from the previous guidance of a positive Ebidta of up to $100m. Chemical prices have deteriorated as a result of the slump in oil prices and the Covid-19 global demand reduction.
The reduction in the Ebitda forecast is the latest setback after the LCCP Low-density polyethylene (LDPE) unit was rocked by a fire in January.
Investors were also concerned that the LCCP unit hads been an albatross for the group amid project and cost overruns that have resulted in ballooning debt.
However, the company said beneficial operations of the Guerbet and Ziegler units remained on track for the end of June 2020 and the LDPE unit, which was planned for the second half of the calendar year 2020, was now targeted to be on-line by the third quarter of calendar year 2020. “The acceleration of this timeline will ensure that Sasol captures the additional contribution margin above ethylene, given the current low ethylene prices achieved in the market,” it said.
Chief executive Fleetwood Grobler said LCCP operations continued, despite the Covid-19 pandemic.
“Our operation in Louisiana has been continuing and there has been no impact due to Covid-19. The state of Texas has classified our personnel as essential services workers,” said Grobler during a conference call yesterday.
Sasol also announced the cutting of up to 40 percent in directors' fees, while it said that the group executive committee members were expected to sacrifice 20percent of their salaries in an effort to mitigate against the impact of the pandemic.
It said that Grobler would make a two-part salary sacrifice, comprising a 33percent donation for three months from May to the Solidarity Fund and for the remaining five months to December 2020, a salary sacrifice of 20percent would apply. Sasol said it aimed to sustain liquidity headroom above $1bn for the foreseeable future considering that it had no significant debt maturities before May 2021.
“These measures are necessary to help protect the company's balance sheet and liquidity until at least the end of the financial year 2021,” it said.
Sasol also said that its mining’s full-year productivity was expected to range between 1130 and 1180 tons per continuous miner per shift.
Sasol's share price gained 12.85percent to close at R66.40 on the JSE yesterday.